Molson Coors profit falls on charges; shares down

NEW YORK (Reuters) - Molson Coors Brewing Co (TAP.N) TAPa.TO said on Tuesday quarterly net profit fell slightly on one-time items and weak sales in Britain, helping to push the brewer's shares down as much as 4 percent.

The maker of Molson Canadian and Coors Light said third-quarter net income dipped nearly 1 percent to $134.7 million, or 74 cents per share, from $135.8 million, or 78 cents per share, a year earlier.

Excluding items, earnings were 95 cents a share, topping the analysts' average forecast of 92 cents, according to Reuters Estimates. The company cited price increases, a lower tax rate, the weak dollar, cost cutting and growth of its brands, which include Blue Moon, Carling and Keystone.

Also on Tuesday, Sam Adams maker Boston Beer Company Inc (SAM.N) reported a sharp drop in quarterly net income on higher costs for ingredients and packaging material, and its shares fell 25 percent.

In Molson's largest markets, Canada and the United States, the company said it had gained share and sales had increased.

But UBS analyst Kaumil Gajrawala called the results mixed, noting the earnings beat came from a lower-than-expected tax rate. He also said while sales rose in the United States and Canada, which together account for about three-quarters of the company's total, margins in both regions were below his expectations.

Net sales in the quarter rose 6.9 percent to $1.69 billion, helped by the weak dollar, which boosts the value of overseas sales when they are converted to dollars for inclusion on the company's income statement.

Sales by volume fell 0.2 percent to 11.2 million barrels, due mostly to the impact of colder-than-usual UK weather.

Sales to retailers rose 2.1 percent as a 6.4 percent increase in the United States and a 0.8 percent rise in Canada offset a 6.9 percent decline in the UK.

U.S. net sales per barrel rose 2.5 percent as the company raised beer prices to offset higher costs of commodities such as grain and aluminum.

Goldman Sachs analyst Judy Hong said sales were much better than she had expected and she would recommend buying Molson shares on their weakness. Hong has a "buy" rating on the stock.

"The key item to focus on is the very strong performance in the North American businesses, where sales trends remain strong and Molson Coors is gaining share, pricing looks healthy and cost savings are driving solid operating profit growth," Hong wrote in a research note.

As for Boston Beer, it reported a 46 percent drop in quarterly net income, and its earnings were 21 cents per share, half the average analyst estimate of 42 cents. It also lowered its full-year outlook and said cost pressures would erode margins further going into 2008. Its shares closed at $38.55.

STRENGTH EXPECTED TO CONTINUE AT MOLSON

Molson Chief Executive Leo Kiely said third-quarter U.S. sales reflected the best quarter in a long time, and added in an interview that trends appeared to be even stronger for the start of the fourth quarter, which is usually a smaller quarter for beer companies than the third.

The No. 2 U.S.-listed brewer behind Anheuser-Busch Cos Inc (BUD.N) was formed by the 2005 merger of Canadian brewer Molson Inc and U.S. rival Adolph Coors Co.

Last month, Molson Coors, which is third in the United States by market share, said it planned to combine its U.S. operations with those of SABMiller Plc (SAB.L), which has the No. 2 spot.

Kiely said Molson filed with U.S. antitrust regulators on October 19. The U.S. Department of Justice is reviewing the deal.

Kiely, tapped to run the venture to be called MillerCoors, also said there would be little near-term disruption to the company's operations, a concern of several analysts.

"My sense of both our U.S. organization and our distributor network is that they're very focused. I don't think we're going to miss a beat," Kiely told Reuters. "And I think that's reflected by the continuing strong sales to retail we're seeing kicking off the fourth quarter here."

Molson shares were down $1.37, or 2.4 percent, at $55.21 on the New York Stock Exchange after falling to $53.67.

At Monday's close, the stock, which trades at 18.5 times next year's earnings estimates, had gained nearly 23 percent over the last three months, outperforming a 2.3 percent gain by the Standard & Poor's 500 Index .SPX.

(Additional reporting by Alexandria Sage)